Monday, June 22, 2015

Raise taxes

It is election season once
again. Promises are flying but canny voters know better than to be
taken in by them. They all know that what candidates promise before
the election has little to do with what they do once they are in
office.

We hear on all sides how
candidates will remedy the injustices and inequalities of the economy
as it is today. The candidates offer to improve the lot of the middle
class. But there is one important question that no one wants to
address – except perhaps Bernie Sanders: reducing injustice and
improving the lot of the middle class will cost a lot of money. No
candidate is telling us where they will get the money to do all these
good works.

But unless a candidate has a
feasible plan for raising extra money, their promises to make life
better for most of us are not worth much. What we need to know about
candidates is whether they are going to increase government revenue
in order to honor their commitments.

The obvious answer is: we need
to raise taxes, specifically we need to raise taxes on the rich, on
the people who take home more than $100,000 a year. Candidates who
are unwilling to do that will not be able to deliver on their
campaign rhetoric.

In 2011 half of the taxpayers
earned less than $35,000 a year. The top 1% earned more than 10 times
as much at close to $390,000 a year. The tax rate for people earning
less than $35,000 was 3%. You would expect the tax rate for the top
1% to be 10 times as much, – 30% – but it was only 23%. It would
be more than fair for the top 1% to pay income tax at a much higher
rate.

The rich get financial benefits
not given to us. For instance, employees of Walmart or fast food
restaurants do not earn enough to get by and the government – the
taxpayers – help out. Food stamps and other social services for
people who do not earn enough to live, are in fact a subsidy to their
employers. Instead of paying for food stamps we should demand that
employers, like Walmart or fast food restaurants, pay a living wage.

But is the subsidy for business
not at the same time a subsidy for the customer? Suppose we demanded
that Walmart and their competitors paid a living wage. They would
still be forced by competition to keep their prices low. Their
profits would decline. It is the employer who derives special
benefits from government subsidies.

Businesses get preferential
treatments in other ways. 39% Fortune 500 corporations paid no
income tax between 2008 and 2012. By law corporations are supposed to
pay 35% federal income tax.

Trucking companies get to use
the interstate highway network. The government pays for that. The
government doesn't pay for my computer that I work on when writing,
sometimes – although not frequently – for-profit. Trucking
companies get a government subsidy. I do not.

The first step towards a
creditable program of increased fairness is to raise the income tax
on the top 10 or 15% of wage earners. A second step is to abolish
subsidies for business. We must make all employers pay a living wage.
That will save taxes and improve the lives of that half of citizens
who earn less than $34,000 a year. The government will gain
considerable revenue by collecting taxes on large corporations. If
businesses use government supplied infrastructure for profit they
should be made to pay for that. Media companies, for instance, should
pay for using TV or radio channels.

These recommendations are
becoming very mainstream. They have even been endorsed by a recent
report from the International Monetary Fund. But Congress is, once
again, deaf.

Common wisdom is that
candidates who promise to raise taxes on the rich and to abolish
subsidies for private businesses cannot be elected.

But the top 10% of taxpayers
are only 10% of the voting public. How could they possibly block the
election of someone chosen by the majority of the remaining 90%? The
fear is obviously that some very rich people can affect the election
by spending, literally, millions of dollars to support candidates
that will not interfere with their making obscene profits.

To be sure money talks very
loudly in elections. But not always. We have seen some notable
exceptions such as the defeat of Eric Cantor of Virginia by an
unknown opponent who had no money.

Political candidates who are
serious about remedying the glaring injustices in our current
political and economic commitments will have to take a chance and
come out openly and say what needs to be done: raise taxes and shut
down business subsidies.